The ABI Code of Conduct on Retirement Choices

Transcription

1 The ABI Cde f Cnduct n Retirement Chices Cntents 1. Intrductin p.1 2. Applicatin f the Cde p.2 3. The custmer jurney: summary p.2 4. The custmer jurney p.3 a) Understanding retirement p.3 b) Understanding the different ways t take retirement incme p.4 c) Understanding hw t buy p.4 5. Unrequested illustratins p.6 6. The sales prcess p.7 7. Terminlgy p.8 8. Useful resurces p.8 Annex A: Template cver letter p.9 Annex B: Template shpping arund guide p.13 Annex C: Cmpliance p.17

2 1. Intrductin This Cde f Cnduct has been develped by the ABI and its members t ensure that pensin prviders cmmunicatins t custmers appraching retirement help every custmer t make an infrmed decisin by understanding: his r her retirement chices; the different prduct types available, and their apprpriateness fr the custmer s circumstances, including enhanced annuities; and the benefits f shpping arund fr the mst apprpriate and cmpetitive retirement incme prduct. 2. Applicatin f the Cde The Cde sets ut the rules that ABI members must fllw thrughut the retirement prcess, including where custmers enquire abut retiring early. It applies wherever an ABI member is cmmunicating directly with a new r existing custmer wh can buy a lifetime annuity. The Cde applies t ABI members in relatin t trust-based ccupatinal schemes in these circumstances; and therwise where the prvider is instructed by the trustees that it shuld apply. These requirements must be fllwed in additin t any legislative r regulatry requirements that may als be relevant, but d nt verride any existing cntractual requirements previusly agreed with the custmer, their trustees r anther prvider. This includes, fr example, any agreement that the trustees f a scheme are respnsible fr cmpiling the custmer cmmunicatins, r any autmatic cnversin f a pensin pt t an annuity at the age f The custmer jurney: summary The primary purpse f all custmer cmmunicatins is t help the custmer understand the decisins he r she must make, and t supprt him r her thrugh the retirement prcess. The prvider must ensure that their cmmunicatins take the custmer thrugh the fllwing jurney: a) Understanding retirement The custmer must be clearly infrmed abut the decisins he r she will need t make befre receiving a retirement incme. The timetable f these decisins must be set ut clearly, and the pssibility f deferring retirement, cmmuting r amalgamating pensin pts must be explained. b) Understanding the different ways t take retirement incme The prvider must explain the range f ways retirement incme can be taken, including thse prducts they d nt ffer themselves. The prvider must give the custmer clear infrmatin describing the characteristics f the different prducts and where further infrmatin and help can be fund. The prvider must highlight the pssibility f jint, escalating and enhanced annuities. 2

3 c) Understanding hw t buy The prvider must encurage the custmer t gather cmparative qutatins frm different prviders. In rder t d this, the prvider must clearly explain hw this can be dne, prvide all the infrmatin needed and must nt sell any prduct by relying n the custmer s inertia r ignrance. 4. The custmer jurney a) Understanding retirement Between tw and five years prir t their selected retirement date (SRD), a prvider must cmmunicate with a custmer n an individual basis at least nce t: Encurage the custmer t start cnsidering their retirement ptins Intrduce the custmer t the decisins they will need t make This can be dne thrugh the annual pensin statement, r alternatively thrugh a separate custmer cmmunicatin. If a prvider has nt already been apprached by a custmer abut their retirement ptins, the prvider must als: send ut a wake-up pack at least 6 mnths pre-srd fr trust-based ccupatinal schemes and at least 4 mnths pre-srd fr cntract-based schemes send ut a fllw-up pack at least 10 weeks pre-srd fr trust-based ccupatinal schemes and at least 6 weeks pre-srd fr cntract-based schemes the prvider must make an effrt t trace the custmer if the prvider des nt have a current address fr the custmer. Bth wake-up packs and fllw-up packs must als: Highlight the imprtance f the cmmunicatin and emphasise that the custmer shuld nt ignre it Be clear and jargn free (fr guidance, see Custmer Impact Clear Language and Layut Gd Practice Guide, ABI Jargn Buster and the Plain English Campaign Be targeted as much as pssible t the circumstances f the individual custmer Set ut infrmatin in as accessible and engaging a way as pssible, with signpsting t key infrmatin where relevant Avid incnsistencies and irrelevant infrmatin, r duplicatin within each pack Take accunt f custmer preferences f the apprpriate methd f cmmunicatin where pssible Highlight the benefits f shpping arund, and set ut ptins including deferring retirement, cmmuting r amalgamating pensin pts. 3

4 Fllw-up packs must: Give a strng message f the need t make a decisin Bth thrugh the wake-up and fllw-up packs, and when apprached by a custmer abut their retirement ptins, a prvider must: Encurage the custmer t cnsider their circumstances and their retirement incme ptins Encurage the custmer t seek financial advice and/r further infrmatin (by at least signpsting them t the useful custmer resurces) Explain the timescale f the retirement prcess Explain the decisins the custmer needs t make at each pint f the retirement prcess b) Understanding the different ways t take retirement incme Bth thrugh the wake-up and fllw-up packs, and when apprached by a custmer abut their retirement ptins, a prvider must: Explain the range f ways in which a custmer can receive their retirement incme, including the different annuity ptins and prducts available, particularly the pssibility f medical cnditins r lifestyle chices leading t a higher level f retirement incme, and including jint and escalating annuities and ways t keep savings invested (see Annex A fr brief descriptins f these prducts) Encurage the custmer t seek further advice and/r infrmatin abut the different ways in which they might be able t take their retirement incme (by at least signpsting them t the useful custmer resurces) Highlight any applicable guaranteed annuity rate (GAR) r ther guarantee r market value reductin (MVR) Bth wake-up packs and fllw-up packs must als: Prminently highlight the pssibility f medical cnditins r lifestyle chices leading t a higher level f retirement incme Prminently highlight any applicable guaranteed annuity rate (GAR) r ther guarantee Include the Mney Advice Service leaflet c) Understanding hw t buy Bth thrugh the wake-up and fllw-up packs, and when apprached by a custmer abut their retirement ptins, a prvider must: Indicate the value f the custmer s pensin pt Explain the benefits f shpping arund and that ther prviders might ffer a higher level f retirement incme Explain that the prvider might nt ffer the annuity ptins r prduct that best meets the custmer s needs 4

5 Explain t the custmer hw t shp arund and encurage the custmer t seek further advice and/r infrmatin abut this (by at least signpsting them t the useful custmer resurces) Bth wake-up and fllw up packs must als: Make available all infrmatin abut a custmer s pensin pt needed fr shpping arund in ne easily accessible place (see Annex A) Prminently highlight the benefits f shpping arund and state clearly that ther prviders might ffer a higher level f retirement incme Include a shpping arund guide (see Annex B) [NB this may be changed if the guide is incrprated int the MAS guide] Nt allw the custmer t purchase an annuity frm the prvider withut first cntacting that prvider Nt include an annuity applicatin frm unless specifically requested by the custmer. 5

6 5. Unrequested Illustratins An unrequested illustratin that is included in the wake-up r fllw-up pack, where a prvider demnstrates the level f incme the custmer s pensin pt culd buy, must: be fr the purpses f: encuraging the custmer t cnsider which annuity is mst apprpriate fr his r her circumstances, and demnstrating the impact the decisin will have n their retirement incme clearly state that all rates are indicative, where that is the case shw a rate that the custmer is able t access use standardised payment ptins, unless the custmer cannt access these be as cncise and clear as pssible clearly and prminently state that the custmer may be able t btain a higher rate by shpping arund Unless the custmer has requested an alternative, an illustratin must clearly set ut at least: any applicable GAR r ther guarantee a single-life annuity a jint-life annuity and either an escalating annuity, r a prminent statement as fllws: [This illustratin des nt include / we d nt ffer] an escalating annuity. An escalating annuity helps yu keep up with inflatin. With this type f annuity yur payments will start lwer than with ther annuities, but will increase ver time. Please cntact us if yu wuld like us t prvide an illustratin fr an escalating annuity. and either an enhanced ptin, r a prminent statement as fllws; [This illustratin des nt include / we d nt ffer] a rate based n yur health r factrs that affect hw lng yu might live, such as medicatin yu take, where yu live, yur ccupatin and whether yu smke. This is knwn as an enhanced annuity and if yu are eligible fr ne, [this type f annuity / anther prvider] culd ffer yu a much higher level f incme. 6

7 6. The sales prcess Prviders must nt send an annuity applicatin frm t custmers in either the wake-up packs r fllw-up packs. An annuity applicatin frm must nt be sent until cntact has been made between the custmer and a prvider. A persnalised illustratin must be prvided t the custmer befre the sale f an annuity is cmpleted. This may be by telephne r in writing, r any ther methd the prvider cnsiders apprpriate. When cllecting infrmatin frm the custmer in rder t send ut a persnalised illustratin, annuity qutatin r t sell any retirement incme prduct, the prvider must ensure the custmer is asked the fllwing questins and at each apprpriate pint is explicitly and clearly made aware f any risk resulting frm their answers. This can be dne by ensuring the custmer has filled ut a cmprehensive infrmatin cllectin frm whether nline r in hard cpy, by means f a telephne cnversatin, by ensuring the custmer has cnsulted a financial adviser, r by any ther methd the prvider cnsiders apprpriate. Whether they are taking any small pts as cash and/r taking tax free cash Whether they are married/partnered r have a dependent wh might utlive them Whether they are cncerned abut their incme lsing value because f inflatin Whether they have any lifestyle r medical cnditins that may mean they are eligible fr an enhanced annuity Whether they have any ther pts and wuld benefit frm cmbining them The prvider must als highlight t their custmer the benefits f shpping arund. When quting r selling an annuity, a prvider wh des nt ffer an enhanced annuity must make the fllwing statement: We d nt ffer a rate based n yur health r factrs that affect hw lng yu might live, such as medicatin yu take, where yu live, yur ccupatin and whether yu smke. This is knwn as an enhanced annuity and if yu are eligible fr this type f annuity, anther prvider culd ffer yu a much higher level f incme. Prviders must make all payments prmptly and accurately, t the same standards as wuld be achieved thrugh the Optins service. Prvider cmmunicatins fllwing purchase must: cnfirm the details f the purchase clarify the details f any cancellatin rights Where a prduct was bught thrugh the Open Market Optin, bth prviders must: use best endeavurs t ensure the prduct is set up within 30 days frm receipt f infrmatin by the receiving prvider t cmpletin f the cntract by the prvider use Optins where pssible Where a custmer s purchase is delayed, the prvider must take steps t reslve the delay as quickly as pssible and keep the custmer infrmed. 7

8 7. Terminlgy The ABI encurages its members t use plain English in cmmunicatins with custmers. This Cde des nt require ABI members t use particular terminlgy. Fr example, it uses phrases such as enhanced and escalating annuities but members can equally use impaired r increasing. Where the Cde refers t custmers, it means bth prspective and existing custmers. 8. Useful custmer resurces Fr general retirement advice and infrmatin The Mney Advice Service, , The Pensin Advisry Service, , The Pensin Service, fr pensin tracing, plus infrmatin abut pensins including State Pensin frecasts: Fr financial advice and t find an adviser IFA Prmtins, Persnal Finance Sciety, [A suitable directry f specialist retirement incme advisers will be added nce this is available] Yu may be able t access advice thrugh yur wrkplace and can use yur current financial adviser, if yu have ne Fr infrmatin abut different retirement incme prducts The Mney Advice Service leaflet Yur pensin it s time t chse The Pensins Regulatr leaflet Making yur retirement chices think befre yu chse The Pensin Advisry Service, including an nline annuity planner Fr help with shpping arund The Mney Advice Service nline retirement incme cmparisn tl, 8

9 Annex A Template cver letter fr wake-up and fllw up packs Objective The cver letter t bth the wake-up and fllw-up pack must: Give custmers all the infrmatin they need abut their pt t shp arund Emphasise the imprtance f shpping arund Highlight the mst imprtant questins the custmer must answer in rder t chse an apprpriate retirement incme prduct. Use f the template and key pints that must be made Prviders must use the template t ensure that: The cver letters are engaging, relevant and shrt (3 pages at mst) Their custmers are taken thrugh the custmer jurney set ut in this cde The value f the pensin pt, any guaranteed annuity rate r ther guarantee, and any market value reductin is included n the first page The three questins n the custmer s circumstances are included The headline message and summary f infrmatin appear n the first page f the letter The text in the headline message is used. Prviders d nt need t use template s exact wrding r rder, unless stated here. Sectins that are nt applicable t the custmer need nt be included. Any shpping arund service ffered by a prvider, r ther way t access advice, may be highlighted in the letter. Occupatinal schemes If the prvider is issuing the wake-up letter t the trustees, sufficient time must be allwed fr the trustees t frward the infrmatin t the member t meet the six mnth deadline. This material may include a letter t the member, depending n arrangements between the prvider and the trustees, as mentined in sectin 2. 9

10 [1 Headline message] This letter cntains imprtant infrmatin t help yu t turn yur pensin savings int a retirement incme. It s imprtant that yu read this letter and cnsider all yur ptins it will help yu get the best value frm yur savings. [2 Intrductin] Dear [X] Yu are appraching yur selected retirement date, and will sn need t make a decisin abut what t d with the mney yu have saved with us. Buying a retirement incme has been made easier recently and this letter and the accmpanying infrmatin will help yu t d this. Yu shuld als shp arund and cnsider taking advice t find the best pssible incme and the enclsed Shpping Arund guide [NB this may change if incrprated int MAS guide] explains hw t d this. If there is anything yu dn t understand r yu wuld like t talk thrugh yur ptins, please cntact us n [XXXXXXXXX]. Alternatively, yu can ring The Pensins Advisry Service fr free impartial infrmatin and guidance n all pensin matters n [3] Summary f infrmatin [Firm t insert infrmatin] Name f plicyhlder: Plicy number: Current value f pensin pt: Infrmatin n any GAR (r ther guarantee) r MVR: [4] Retirement Optins There are many different ways yu can take yur retirement incme. Belw are a few f the mst ppular ptins and there is mre infrmatin abut each f them in the accmpanying brchure. Once yu have decided what yu want t d, please get in tuch with us and let us knw. a) Pstpne taking yur retirement incme Yu d nt need t d anything with yur pensin pt yet. Yu can leave it with us and we will cntact yu again in X years. Please let us knw if yu want t d this n the frm included. b) Taking smaller pensin pts as a lump sum [If apprpriate and relevant t scheme] 10

11 If the ttal value f all yur pensin savings is less than [ X,000 (current tax year)], yu may be able t take it all as a cash lump sum. If yu wish t d this, yu have t take all payments frm all yur pts within a 12-mnth perid. If up t tw f yur pts is each less than [ X,000 (current tax year)], yu may als be able t cash each f them in, regardless f any ther pensin savings yu have. If yu think yu might like t d this, please ask us fr further details. c) Tax free cash Yu can usually take up t a quarter f yur pensin pt tax-free as a cash lump sum, using the remainder t buy a retirement incme prduct. d) Buy a retirement incme prduct i) Annuities An annuity is a financial prduct where yu use all r sme f yur pensin savings t buy a guaranteed incme fr the rest f yur life. It is the mst ppular way peple buy a retirement incme and, if yu have built up mre than ne pensin pt, yu can cmbine them int ne annuity. Buying an annuity is a ne-ff decisin that will set yur incme thrughut yur retirement and cannt be changed. Yu d nt have t buy an annuity frm us, and yu shuld shp arund t make sure yu buy the right type f annuity fr yu. The Shpping Arund guide enclsed [NB this may change if incrprated int MAS guide] cntains mre infrmatin n hw t cllect different qutatins frm different annuity prviders. There are many different types f annuity, each designed t suit different persnal circumstances. If yu plan t buy an annuity, yu shuld cnsider the fllwing questins: Are yu married r d yu have a partner r anther dependant? Will they need an incme if yu die first? If s, yu shuld cnsider a jint-life annuity, which cntinues t pay an incme fr bth f yur lives. D yu smke? Are yu n any medicatin r d yu have a medical cnditin? If s, yu may be eligible fr an enhanced annuity, which culd pay yu a much higher level f incme. D yu want yur incme t increase ver time t help keep up with inflatin? If s, yu shuld think abut an escalating annuity, which starts lwer but increases ver time, r adjusts t rise in line with inflatin. There is a free nline annuity planner at which can help yu answer these and ther questins abut which type f annuity is right fr yu. 11

12 ii) Prducts that keep yur mney invested Sme retirement incme prducts allw yu t keep yur mney invested, which gives the ptential fr yur incme t grw, but the incme is nt guaranteed and there is a risk that yur incme will g dwn. Flexible investment-linked annuities prvide an incme fr life but allw yu t keep yur mney invested. Fixed term annuities use part f yur pensin t prvide incme fr a fixed perid. Drawdwn allws yu t draw an incme frm yur pensin while keeping it invested. The accmpanying brchure includes infrmatin abut these ther ways yu culd take yur retirement incme. Yu shuld speak t a financial adviser if yu are thinking abut ne f these prducts. [5] The Lifetime Allwance [if apprpriate] If the ttal value f all yur pensin funds is mre than [ X,000,000 (current tax year)], and yu have nt taken steps t prtect yur funds, we have t apply a Lifetime Allwance charge set by the Gvernment. We strngly recmmend that yu take financial advice if yur ttal pensin savings exceed r are clse t this amunt. [6] What happens next? [in line with the prvider s prcess] Please cntact us t discuss what yu wuld like t d with yur pensin pt, either by telephne n [XXXXXXXXX], r by filling in the frm enclsed. If yu d nt get in tuch with us, we will write t yu again in [x-x] weeks. 12

13 Annex B Template shpping arund guide [NB will be remved if it is incrprated int the MAS guide, but the messages will remain] Objective The shpping arund guide has been designed t encurage custmers t shp arund and supprt them thrugh the prcess by: Shwing them different methds f shpping arund Alerting them t the questins they will be asked Helping them gather the infrmatin necessary t answer thse questins, and Shwing them where t g fr help with shpping arund. Use f the template Prviders must use the template t ensure that their shpping-arund guide: Is a separate leaflet f n mre than three pages that is clearly distinguishable frm ther material in the same cmmunicatin pack Actively encurages custmers t lk beynd the prvider s wn prducts Accurately signpsts the custmer t where further infrmatin can be fund either in the prvider s material, r frm anther surce. Prviders are nt required t reprduce the wrding r rder f the template exactly, but must include links t the external rganisatins mentined. 13

14 SHOPPING AROUND CAN HELP YOU IMPROVE THE INCOME YOU RECEIVE IN RETIREMENT Hw d I shp arund? Using a financial adviser Financial advisers are qualified prfessinals wh can give yu individual advice n yur retirement incme. They can assess yur individual circumstances, talk yu thrugh yur ptins and recmmend a prvider that ffers the right prduct fr yu. Yu can find an adviser near yu at these websites; r [a suitable directry f specialist advisers will be added nce this is available] Yu may be able t access a financial adviser thrugh yur wrkplace and can use yur current financial adviser, if yu have ne. Using a cmparisn website The Mney Advice Service ffers a free and independent cmparisn website fr standard annuities which can be fund here; There are several websites which ffer a dedicated shpping arund service, allwing yu t cmpare and purchase different annuities ffered by different prviders, just like with mtr r travel insurance. Talking directly t the prduct prviders If yu want t talk t any prduct prvider abut what they can ffer, the Assciatin f British Insurers has cllected many f their cntact details here: [ What questins will I be asked? Questins abut yur pensin savings Yu will need t answer questins abut hw much mney yu have saved in a pensin. Yu shuld als be aware f any guarantees r restrictins that might apply t sme r all f this mney and f any ther pensin savings yu have with ther prviders befre yu select a retirement incme prduct. We have sent yu all the necessary infrmatin abut the mney yu have saved with us alng with this guide. If yu dn t understand what we have given yu, yu can cntact us and ask us t explain it r g t ne f the free and independent bdies listed n the last page f this guide. 14

15 Questins abut hw yu want t take yur retirement incme There are lts f different retirement incme prducts such as annuities r incme drawdwn, and lts f different ways in which yu may be able t take yur mney at the best time fr yu. Fr example, if the ttal value f all yur pensin savings is less than 18,000 and yu are ver 60, yu may be able t take it all as a cash lump sum. Yu shuld als cnsider whether yu shuld make sure yur partner (if yu have ne) is prvided fr if yu die befre them. We have included sme material with this guide explaining the different prducts available. Yu can get mre infrmatin and help with understanding it by talking either t us r the free and independent bdies listed n the last page f this guide. Questins abut yu Yu will be asked questins abut yu and yur partner such as hw ld yu are and where yu live, as these factrs may affect the level f incme yu receive. Als, if yu r yur partner answer yes t any f the fllwing three questins yu culd be eligible fr a much higher level f incme and will need t be prepared t cmplete a questinnaire abut any medical r lifestyle cnditins yu r yur partner might have. D yu smke? Have yu been diagnsed with a medical cnditin within the last 10 years? Are yu n any medicatin fr a health cnditin? Cnditins can range frm minr illnesses such as high bld pressure r high chlesterl right thrugh t mre serius cnditins such as a heart attack r strke. Yu can get the full questinnaire frm yur financial adviser, an enhanced annuity prvider, r frm this website Make sure yu r yur adviser is using the mst up-t-date versin f this frm. Yu might need t talk t yur dctr t get the details f any medicatin yu are receiving r treatment yu have had. Where can I g fr help? The Mney Advice Service is a great place t start. Yu can g t their website t find lts f infrmatin abut pensins and retirement incme prducts, and use their unbiased cmparisn tables t help yu cmpare annuity rates. Their Mney Advisers can help yu with yur mney questins n Calls shuld cst n mre than 01 r 02 UK-wide calls, and are included in inclusive mbile and landline minutes. 15

16 The Pensins Advisry Service als gives free and independent advice n pensins and has a free helpline yu can call n They als have an nline annuity planner that can help yu chse what srt f annuity is right fr yu: We can explain anything yu dn t understand abut yur pensin pt r the infrmatin we have sent yu. Yu can call us n r us at: [Ihaveyurmney@prvider.cm] 16

17 Annex C - Cmpliance All ABI members must be cmpliant with this Cde as a cnditin f Membership. All CEO s f affected cmpanies must cmplete and sign the attached letter annually. Prviders must be able t demnstrate that they are assessing the impact f their cmmunicatins and prcesses n custmers retirement chices. T d this, they must: Mnitr custmer respnses t cmmunicatins abut retirement chices Cllect infrmatin n the number f retirement incme prducts being bught by internal and external custmers, if applicable If applicable, mnitr the number f days taken t cmplete the sale f an annuity, using the pints mentined n p.6 Share with the ABI the results f the abve exercises Submit a sample f cmmunicatins materials t the ABI, wh will cmmissin an external review f all cmmunicatins t assess effectiveness f the Cde in the first year after implementatin and in subsequent years if apprpriate. CHIEF EXECUTIVES COMPLIANCE LETTER If applicable, please return a letter n yur cmpany headed paper, including these paragraphs and signed by yur Chief Executive, by first Friday in March, annually t: Assciatin f British Insurers, 51 Gresham Street, Lndn EC2V 7HQ Retirement Chices Cde f Cnduct I can cnfirm that [XYZ Cmpany Ltd] cmplies with the ABI Retirement Chices Cde f Cnduct. I have caused checks t be carried ut t cnfirm that ur prcesses and cmmunicatins meet the rules set ut in the Cde and I have taken apprpriate actin where any shrtcmings have been identified. [Signed] Name Cmpany r cmpanies cvered by the letter 17